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A European Kerosene Tax to remove market distortions

Today, the European transport market is characterized by market distortions which systematically disadvantage sustainable modes of transport and put our health and our climate at stake. First of all, the price of transport does not reflect the true costs. Secondly, selective tax subsidies further distort competition at the expense of environmentally friendly rail transport. Airlines, for instance, annually receive a total of 30 billion euros of tax subsidies. In order to correct market failure and to promote fair competition between modes of transport, we demand the introduction of a European climate protection tax on aviation fuel.

Social costs of transport

Transport operations, particularly in road and air transport, generate significant external costs that are not reflected in market prices: accidents, atmospheric pollution, noise, damage to buildings, impairment of natural resources and, above all, damage to climate and to public health. In the EU, however, the price for transport does not factor these costs into its calculations. Thus, current transport prices are biased, as low prices provide incentives for consumers to choose unsustainable modes of transport. The result is a systematic misallocation of resources with disastrous consequences for our environment borne by society at large. Therefore, we need to take appropriate measures to internalize all costs of transport!

Subsidies and political will

Although emissions from aviation operations are two to four times more damaging than emissions from road and rail transport, selective subsidies further amplify existing market distortions at the expense of railway transport. Passenger and cargo flights are not subject to any kerosene tax, while energy and fuel used in rail transport are fully dutiable. The exemption from kerosene tax is worth 14 billion euros. Besides, cross-border flights are VAT-exempt, whereas many EU Member States apply charges on access and use of railway tracks., This non-application of valued-added tax on international flights accounts for another 16 billion euros. This situation is the result of wrong political choices whose consequences we all have to bear.

Establishing fair competition

In order to remove the discrimination of sustainable transport and to promote fair competition, we call for the introduction of a European climate protection tax on aviation fuel on all domestic and intra- EU flights. A tax on kerosene will help internalise a part of the social costs as well as provide strong incentives to the aviation industry for the development of more efficient technologies.

Introducing a Kerosene tax

Our proposal for a EU-wide tax on aviation fuel is in accordance with current European and international legislation and could thus be implemented without legal obstacles. Since the tax will be levied in all Member States for intra-EU flights it will not have any negative impact on market competition in the EU. An international comparison shows that our approach is neither radical nor prohibitive: India, Japan and the USA already charge a similar tax on domestic flights.

Creating European added-value

The additional revenue can be used for the funding of measures to combat climate change world-wide and to foster sustainable transport projects designed to promote European unification such as the modernisation and rehabilitation of railway lines across borders. Moreover, revenues can help fund additional political action to provide support and promote research in the field of transport.